dollar stores – Fortunehttp://fortune.com
Fortune 500 Daily & Breaking Business NewsFri, 09 Dec 2016 13:36:36 +0000enhourly1http://wordpress.com/http://1.gravatar.com/blavatar/dab01945b542bffb69b4f700d7a35f8f?s=96&d=http%3A%2F%2Fs2.wp.com%2Fi%2Fbuttonw-com.pngdollar stores – Fortunehttp://fortune.com
Fortunehttps://s0.wp.com/wp-content/themes/vip/fortune/assets/images/fortunelogo.pnghttp://fortune.com25040How Walmart Won Back Shoppers From Dollar Generalhttp://fortune.com/2016/08/25/dollar-general-food-stamps/
http://fortune.com/2016/08/25/dollar-general-food-stamps/#respondThu, 25 Aug 2016 20:07:20 +0000http://fortune.com/?p=1778411]]>Dollar General DG has been cutting prices by about 10% on hundreds of staples like milk and eggs as it looks to keep customers who are drifting back to Walmart. wmt

The dollar store was one of the fastest growing retailers in the years after the Great Recession as low-income shoppers looked for lower prices and closer stores to spend less on gas. On Thursday it reported comparable sales increased 0.7%, well below the 2.6% growth analysts were expecting, according to Consensus Metrix.

And Dollar General said fewer shoppers had come into its stores. In contrast, last week, Walmart said shopper traffic rose at its U.S. stores for the eighth straight quarter, helped by aggressive pricing that boosted its grocery business. Walmart gets some 55% of its revenue from food.

Dollar General slashed prices 10% on average on about 450 of its best-selling items across 2,200 stores during the quarter, Chief Executive Todd Vasos said on a conference call. And Vasos said more price cuts could be in the offing.Dollar General operates 12,500 stores. The retailer has said it wants to boost its store base by about 50% to 20,000 stores in four years.

“We believe that these price reductions are meaningful and recognizable to our consumers,” Vases told Wall Street analysts. “We are committed to further price moves as appropriate over time.”

Dollar General shares plummeted as much as 17% on Thursday. Dollar Tree, dltrwhich defeated Dollar General in a bitter battle to buy Family Dollar two years ago, also reported lower-than-expected business. It shares also fell sharply.

Walmart has been cutting prices, so-called “price investments” in retail parlance, on hundreds of products across categories, putting pressure on dollar stores. What’s more, Walmart’s efforts to upgrade its fresh food area looks to be getting some customers to trade back up.

The price war with Walmart comes at a time so-called food deflation is already pinching all these chains’ sales and profit margins: Dollar General said prices for milk fell 8% and more than 50% for eggs during the quarter.

Adding to the pressure on Dollar General were cuts in food-stamp programs as seven states, all governed by Republicans, ended benefits earlier than they had to.

Those states ended waivers for some able-bodied recipients that were made in 2009, at the height of the Great Recession. According to the U.S. Department of Agriculture, there were 43.5 million Americans enrolled in May in Supplemental Nutrition Assistance Program, as the food stamp program is federally known, compared to 47.5 million in 2012, when it peaked. And by some estimates, another 500,000 people will fall off this year from a program that disproportionately hurts dollar store shoppers.

]]>http://fortune.com/2016/08/25/dollar-general-food-stamps/feed/0Views Of A Dollar General Corp. Store Ahead Of Earnings FigurespwahbaHow the dollar store war was wonhttp://fortune.com/2015/04/24/how-the-dollar-store-war-was-won/
http://fortune.com/2015/04/24/how-the-dollar-store-war-was-won/#respondFri, 24 Apr 2015 10:00:12 +0000http://fortune.com/?p=1092954]]>It was the elevator ridethat many a CEO has come to dread. On the evening of June 18, 2014, Howard Levine, the CEO of Family Dollar Stores, arrived for his meeting at the sumptuous Museum Tower residence in Midtown Manhattan. A white-gloved lift operator hit the button to take him to the penthouse apartment on the 51st floor. Waiting for him was Carl Icahn.

Twelve days earlier, Icahn, the powerful activist investor and founder of Icahn Enterprises, had announced that he'd bought 9.4% of Family Dollar's shares. That same day the 79-year-old multibillionaire called Levine at Family Dollar's modest headquarters outside Charlotte and invited him to fly up for dinner. Like so many corporate chiefs before him--from Apple's Tim Cook to former Chesapeake Energy CEO Aubrey McClendon to Greg Brown of Motorola Solutions--Levine was being summoned for the ultimate activist experience, a ritual in which the dean of Wall Street dealmakers plays the gracious host to the target of his latest campaign while dictating exactly how things are going to go down. Levine knew he couldn't say no.

When Levine, 56, stepped out of the elevator into Icahn's 11,000-square-foot duplex, he and fellow Family Dollar board member George Mahoney were escorted by a butler to the expansive balcony. There they found Icahn mixing a batch of -martinis--Ketel One vodka, up with a lemon twist--for himself and two lieutenants. "Can I get you a drink?" Icahn asked Levine. "I'd love one," replied Levine, "but I'll say no, since I want to keep my wits about me." Icahn didn't miss a beat. "Not drinking isn't going to help you," he fired back, "so you might as well drink." Levine decided to stay sober anyway.

Over a dinner of lamb chops, Icahn told Levine he should sell the struggling Family Dollar business, which Levine and his family had run for 55 years, to its bigger, better-run rival, Dollar General DG. If he played his cards right, Icahn suggested, he might even get a bidding war going. "Carl said he'd broker the deal, that he was the one to get the best price," Levine recalls. Levine argued that trying to sell to Dollar General was futile. He maintained that he had great plans for reviving his own company. When Levine blamed a Family Dollar problem on another, recently departed executive, Icahn cut him off.

"Stop making excuses!" the blunt, Queens-born billionaire replied. "Tell it to your mother." Levine couldn't help laughing. He'd heard all about Icahn's cocktail for confronting CEOs: jiggers of brute force mixed with splashes of high comedy.

There are few bigger stories in corporate America than the rise of activist investors in recent years. The dinner attested to the immense clout wielded by Icahn and a handful of billionaire activists. And the ceremony drove home the new, undeniable reality for Levine: Whether he liked it or not, his company was now in play, and he would have to scramble to influence events.

Other activist billionaires were already circling, squaring off in what became an epic, 18-month war--one that has only recently drawn to a close. As Fortune went to press in late April, the smaller Dollar Tree DLTR chain was close to completing a $9.1 billion acquisition of Family Dollar. To make the deal happen, the two discount retailers had to fend off a no-holds-barred, last-minute assault from Dollar General and contend with a host of the most demanding investors--and biggest egos--on Wall Street.

This extended version of this story is from the May 1, 2015 issue of Fortune magazine.

]]>http://fortune.com/2015/04/24/how-the-dollar-store-war-was-won/feed/0DOL.05.15.Dollar Stores.01shawntullyDollar General will speed up store openings after its failed Family Dollar bidhttp://fortune.com/2015/03/12/dollar-general-store-openings/
http://fortune.com/2015/03/12/dollar-general-store-openings/#respondThu, 12 Mar 2015 12:41:23 +0000http://fortune.com/?p=1028501]]>Dollar General DG may have failed in January to snag smaller rival Family Dollar FDO with a rejected $9 billion takeover bid, but the discount chain is moving full steam ahead with its growth plan.

The low-priced retailer, which sells items for the most part costing less than $10, on Thursday forecast another year of strong sales growth, even with the U.S. consumer enjoying higher spending power thanks to low gas prices and a much better job market. Dollar General plans to open hundreds more stores in 2015 and accelerate the pace of store openings next year.

Dollar General also announced the retirement of its finance chief, David Tehle, a key architect of the retailer’s buyout in 2007 by private equity firms and return to the public markets in 2009.

Here are some of the key details from the company's earnings report.

Speeding up pace of store openings.

Dollar General benefited from the Great Recession as many Wal-Mart WMT shoppers traded down to buy items for cheaper and to save on gas. By January 2015, Dollar General had 11,789 stores across the United States compared with 8,877 just five years ago. Last year, Dollar General added 6% to its total square footage, and said it would add about the same this year in the form of 730 stores, and step that up in 2016 to 7% more square footage.

If Dollar General had prevailed over Dollar Tree DLTR in bagging Family Dollar, it may have had to sell off as many as 4,000 of its stores, according to some media reports.

More sales growth ahead in 2015.

During the key holiday quarter, Dollar General’s comparable sales -- which strip out the impact of store openings or closings in the preceding year -- rose 4.9%, suggesting that improving business at Wal-Mart is not yet biting into its growth. Total sales rose 9.9%, contributing to an 8% jump for the whole year. While conventional wisdom would suggest the improving economy should lead to shoppers trading back up, Dollar General forecast total sales would potentially grow even faster in 2015, rising as much as 9%

More cigarette sales mean lower profit margins.

Dollar General’s adjusted profit only rose 3% to $1.07 billion, a modest clip compared to its sales growth. Part of that is because Dollar General sold more tobacco products, which have lower gross margins than the average for the retailer, in 2014, following CVS Health’s CVS decision to ban such items last year.

]]>http://fortune.com/2015/03/12/dollar-general-store-openings/feed/0A Dollar General Corp. Store Ahead Of Earnings FigurespwahbaWhy Wal-Mart should worry about Family Dollar’s fatehttp://fortune.com/2014/08/18/wal-mart-family-dollar/
http://fortune.com/2014/08/18/wal-mart-family-dollar/#respondMon, 18 Aug 2014 16:08:15 +0000http://fortune.com/?p=772445]]>Wal-Mart Stores WMT executives could not have been too happy to wake up to the news this morning that dollar store dominator Dollar General DG offered $9.7 billion in an all-cash deal to buy out its smaller, struggling rival Family Dollar Stores FDO, outdoing an earlier, accepted cash-stock offer by Dollar Tree DLTR.

Dollar General is by all accounts a supremely well run retailer: it has reported 24 straight years of same-store sales growth, all the while managing a massive expansion in recent years that has won it millions of shoppers looking to save money. Moreover, its operating profit margin has also improved in the last five years despite the costs of opening thousands of new stores.

That management prowess could turn Family Dollar into a far more formidable rival than it has been on the watch of CEO Howard Levine, whose father founded the chain in 1959. Family Dollar has expanded quickly but also has run into trouble in the last two years by misreading its customers and ramping up its offering of pricier items such as beauty products. It has since backtracked, ramping up its inexpensive offerings.

“Dollar General is going to do a better job of managing those Family Dollar stores,” BB&T Capital Markets analyst Anthony Chukumba told Fortune.

The combined Dollar-General/Family Dollar would have 20,000 stores and annual sales above $28 billion (making it as big as Macy’s M. That would give the company more leverage with suppliers, in addition to saving on overhead costs. Dollar General said its Family Dollar offer would yield $550 million to $600 million a year in synergies, compared to annual savings of $300 million promised in the Dollar Tree bid, announced July 28.

Buying Family Dollar would also give Dollar General an enhanced presence in the East– its 11,000-store fleet is disproportionally represented in the South and Texas– and in urban and suburban areas.

And because Family Dollar and Dollar General overlap a lot more with Wal-Mart than Dollar Tree does, with its single price approach (everything is priced at $1 at most at Dollar Tree), that combination is a bigger potential threat to Wal-Mart, especially as it begins to push its smaller store format expansion to win shoppers that want to go buy staples like milk or toilet paper mid-week at a nearby store rather than deal with a big-box store to get pick up a single item.

Wal-Mart’s smaller format strategy is aimed at arresting a six-quarter streak of no U.S. comparable sales growth. But with about 700 such stores expected to be open by year end, Wal-Mart’s small store fleet would still be a fraction of any of the dollar stores.

Wal-Mart gets 56% of its sales from grocery and has had to lower prices this year to keep its customers happy. A more efficient Family Dollar, which has been adding more food products as well as tobacco, would become a more formidable rival for that customers even rebranded as Dollar General stores. (Customer loyalty is seen as quite low in this area of retail.)

Wal-Mart Chief Financial Officer Charles Holley stood up for his company’s small-format stores on a call with reporters last week, saying they held their own against the dollar store format by offering some things they don’t.

“It's a real winning combination when you add the fresh, the gasoline, when you add the RX (prescriptions), and even frozen – we have more frozen than others. And it's really put us in a good position in the small store sector,” Holley said. Wal-Mart’s small stores posted a 5.6% rise in comparable sales last quarter, easily outperforming its superstores.

But even if Dollar Tree’s offer prevails, Family Dollar would likely be better run and as such, more competition for Wal-Mart, BB&T’s Chukumba added. (And if Dollar Tree wins, it does mean more competition in Canada for Wal-Mart. Unlike Dollar General, Dollar Tree operates a fast growing business north of the border.)

It’s hard to see how Dollar Tree could win a bidding war with Dollar General for Family Dollar, given how much bigger Dollar General is, and the fact it is offering a higher bid all in cash. (Dollar General is more than twice as big in terms of store count and has revenue about 33% higher than Dollar Tree.)

Dollar Tree hasn’t yet countered with a higher offer, but however this dollar store soap opera ends, Wal-Mart’s life is about to get tougher.

Here’s a video on the dollar store bidding wars

Updates to include comments from Wal-Mart last week on its small format business and add video clip.

]]>http://fortune.com/2014/08/18/wal-mart-family-dollar/feed/0Inside A Family Dollar Store Ahead of Earnings ReportspwahbaWal-Mart is an underdog in the world of small stores. It’s trying to change.http://fortune.com/2014/08/14/walmart-small-stores/
http://fortune.com/2014/08/14/walmart-small-stores/#respondThu, 14 Aug 2014 18:01:06 +0000http://fortune.com/?p=770835]]>It’s hard to think of the world’s largest retailer as an underdog in anything. But when it comes to serving customers looking for a quick, convenient shopping trip for everyday items, that’s exactly what Wal-Mart Stores WMT is.

Once again, the retailer announced tepid U.S. quarterly sales numbers on Thursday, with fewer shoppers coming into its namesake superstores and cutting back on spending when they did go in.

So the world’s largest retailer thinks it has found the solution to kickstart its U.S. sales: its fleet of smaller stores it hopes will win back shoppers from aggressive rivals like Dollar General DG and Dollar Tree DLTR that in recent years have deftly swooped in on Wal-Mart’s turf and attracted lower-income consumers. It is also betting the small stores will help it win more business in urban and rural areas where there is no space or not enough of a market for a big Walmart supercenter.

These smaller-format stores generate only a tiny fraction of Wal-Mart’s U.S. sales so far, but CEO Doug McMillon was quick to tout them in a pre-recorded call to discuss the retailer’s second-quarter numbers, mentioning their strong performance at the very start of the call.

He has a point. Comparable sales at the 400 or so smaller-format stores rose 5.6% compared to a year earlier, with shopper visits rising 4.1%. Meanwhile, at the 3,288 Walmart supercenters, comparable sales declined and traffic fell 1.1%. Wal-Mart’s U.S. problems have been going on for some time, with many analysts calling the supercenter format pass?. To remedy that, in February, the store announced it was doubling the number of small stores it had initially planned to open this year. Wal-Mart is in the process of opening between 270 and 300 new small stores, including about 90 Walmart Express stores, this fiscal year, and is spending an extra $600 million to do so.

Most of the new stores will open in the last quarter of the year. The Neighborhood Markets stores, the first of which was opened in 1999, are typically 40,000 square-feet, or about one-fifth the size of a superstore, and have a big focus on groceries, which generate more than half of Wal-Mart’s total U.S. revenues. The Walmart Express stores, a newer and smaller format at about 12,000 square feet per store, function very much like convenience stores and offer items such as meats, dairy and pharmacy products.

“I think convenience is where the consumers have been looking,” Wal-Mart Chief Financial Officer Charles Holley said on a call with reporters after the quarterly results were released.

The retailer is planning to add “gas bars” to many of the Neighborhood Markets stores, with the goal of winning shoppers that need to pop in mid-week to get a carton of milk or some pasta and fill up on gas without having to go into a big-box store. What’s more, selling gas is a way to get shoppers to come by more regularly and is also something online retailers can’t match.

“They're trying to go into markets they can’t go with a supercenter since not enough people in those markets- they know they're losing share to dollar stores for the intra-week fill-in trips,” said Edward Jones analyst Brian Yarbrough told Fortune, calling the strategy sound but not risk free as it could cannibalize sales from the supercenters.

Wal-Mart’s accelerated push into smaller format stores comes as dollar stores continue to expand--Dollar General, Dollar Tree and Family Dollar Stores (which Dollar Tree is in the process of taking over Family Dollar in an $8.5 billion deal) operate a combined 24,000 or so stores now, up 23% in just 4 years. And Target TGT is beginning to ramp up its own fleet of smaller, urban stores, though its store count is still negligible for now. Meanwhile, drugstore chains like Walgreen WAG and CVS CVS are expanding their food selection.

So Wal-Mart stands to lose a lot if it doesn’t jump in now.

Still, with only about 700 stores in operation by year-end, the small format locations won’t make much of a dent on Wal-Mart’s anemic comps for a while, Holley acknowledged. And despite this focus on Neighborhood Markets and Walmart Express stores, the retailer has no plans to start shrinking its supercenter fleet.

“Supercenters still have one of the highest returns of any [store] format,” Holley said in response to a question from Fortune. “It would be silly to close a lot of stores with good returns.”

]]>http://fortune.com/2014/08/14/walmart-small-stores/feed/0pwahbaCarl Icahn sinks his teeth into latest target: Family Dollarhttp://fortune.com/2014/06/06/carl-icahn-family-dollar/
http://fortune.com/2014/06/06/carl-icahn-family-dollar/#respondFri, 06 Jun 2014 22:43:05 +0000http://fortune.com/?p=634249]]>Carl Icahn has bought a 9% stake in discount chain Family Dollar Stores, becoming the retailer’s biggest shareholder and the latest activist investor to take an interest in the struggling company.

“Hope to continue our streak of value enhancement,” Icahn said in a tweet on Friday afternoon to announce his investment.

Icahn is known for pressuring companies to make major changes in their businesses including selling off pieces, kicking out board members and firing executives. His most recent headline grabbing battle was with eBay EBAY earlier this year. Icahn’s other relatively recent targets have included Apple, which he pushed to increase share buybacks, and Forest Labs, which agreed to be sold. Both fights yielded big returns.

Icahn did not detail his plans for Family Dollar. But the company is a frequent target of investor agitators. In 2011, Nelson Peltz unsuccessfully tried to buy Family Dollar for at least $7 billion via his Trian Group investment vehicle. Trian still holds 7.4% of shares, according to Bloomberg data. Paulson & Co, a hedge fund that occasionally tries to push for corporate shake ups, holds 5.7%.

If Icahn’s goal is to sell Family Dollar FDO, he could face an uphill battle given how little progress Family Dollar has made in catching up to rival Dollar General in recent years, one Wall Street analyst said. Many prospective buyers may now think that Family Dollar it too hard to fix.

“They haven’t been able to narrow the gap with Dollar General,” Edward Jones analyst Brian Yarbrough told Fortune. “I question who the buyer could be in the case of strategic alternatives,”

Family Dollar, which had a market value of $6.9 billion before Icahn’s tweeted his news, has not weathered economic factors like higher payroll taxes and cuts to Food Stamp programs as well as competitors Dollar General Corp DG and Dollar Tree DLTR have. The retailer, which caters to many lower-income shoppers living paycheck to paycheck, saw sales at stores open at least a year fall 3.8% in its most recent completed quarter, and in April it said it expected more declines in the current quarter. That compares to increases at Dollar General and Dollar Tree.

Family Dollar was in many ways the author of its own misery: it misread its customers last year in expanding its selection of higher priced beauty products and raising prices. It is now reversing course, bringing back more items priced at $1, closing 370 unprofitable stores out of 8,100 (it had 6,800 only three years ago), and slowing its expansion of new stores. It is also widening its assortment of food items as U.S. shoppers try to save on their grocery bills.

Icahn is also likely to face stiff opposition from CEO Howard Levine, who owns 8.2% of Family Dollar shares, but is also the son of Leon Levine, who found Family Dollar in Charlotte, N.C., in 1959.